REPORT OF THE BOARD OF DIRECTORS
The Board of Directors of your Company presents this report on the
activities and operations of your Company for the fifteen months period
ended on 31st March 2000.
CURRENT YEAR'S OPERATIONS:
The Board of Directors have taken a decision earlier that it would be
desirable and appropriate that the financial year of the Company be
extended so as to be in consonance with the financial year of the country,
namely, April to March. Keeping this in mind the current period has been
extended to be a fifteen month period.
Members would recall that in the last year's report fears were expressed
about the outlook for the valve industry during the year 1999. It was,
inter-alia, indicated in the report that poor demand potential has
triggered intense competition amongst the suppliers of steel castings
across borders. The depression forecast in the last year's report proved to
The year 1999 continued to be a difficult year for the valve industry all
over the world and its impact on the valve industry in our country was
tremendous. There was no significant growth in the valve market during
1999, though there have been lot of enquiries.
The poor demand for castings in the international markets triggered intense
competition amongst the leading manufacturers all over the world. This has
resulted in further drying up of the export market for the valve industry
from India and its direct impact was a shrinkage of exports of valves and
castings to foreign countries.
Your Company is the number one rated company in the valve market in India
and therefore had to suffer the ignominy of having the lowest exports than
in any other past years.
The depressed market conditions equally affected the domestic market too.
Despite the company's capacity to produce, there were unfavourable trends
in the domestic markets as well. This was essentially because of the
emergence of large number of small entrepreneurs, with small investments
and very low overheads, coming into the market and offering the products at
much lower rates. This has taken away a good chunk of the domestic market,
which would have otherwise come to your Company. Your Company has, however,
succeeded in entering this fierceful competitive market and preserving its
level of production as in the earlier years for domestic market, despite
the difficulties mentioned above.
In the last year's report an indication was given about the resolution of
all pending issues and the possible facile entry into the North American
market once again. This re-entry into the North American market has taken a
longer time than anticipated because of extreme sensibilities of the market
and the need for careful wooing of the potential customer. The signs of a
good re-entry is visible and happening now.
It was indicated in the last year's report that the Company is having an
ambitious programme of enlargement of the product range in the form of new
and special alloys, heavier weight range castings, fully machined castings
and other types of valve not being manufactured hitherto. In view of the
tremendous financial strain and the high cost involved, the company could
make only a modest beginning in this direction.
As a result of the above features, the utilisation of the plant capacity of
your Company continued to be quite low during the period under review. In
fact there was a slight shrinkage in the production level by about 15% on
an average as a direct result of the depression in the valve market abroad
and the difficult domestic market. The total sales for the fifteen month
period was only about 3825 tons as against 3603 tons during the year 1998.
Exports had fallen down considerably from about Rs. 685 lakhs in 1998 to
about Rs. 385 lakhs during the period under review.
Despute depressed international market and the shrinkage in the domestic
market, your Company was able to more or less sustain its operation, even
though at low productivity level. This was possible only because of the
several steps taken by the company and the large number of cost saving
measures adopted during the period under review. Expenditures have not
only been contained and controlled, but also reduced. Inventories were
being reasonable controlled and realisations are being effected in a more
Your Company has been able to make a break through in the export market.
Your Company is in the process developing patterns and products for a large
number of international potential customers. There has been expansion in
the product range. Periods on developments of patterns and designs have
been considerably brought down, so that the company has been able to make
quick response to international enquiries.
Your Company's quality control system, through ISO certification was
successfully implemented and the company was accredited with the
certification under ISO 9002 by TUV Certification Body.
REVIEW OF OPERATIONS
The Company continued to make cash losses during the period wherein both
international and domestic markets have been going through a depression in
the world market.
During the year the company's total sales dropped from Rs. 2707.49 lakhs
for the year 1998 (12M) to Rs. 2616.04 lakhs for the year ended March 2000
(15M). The exports have also dropped as mentioned earlier in the report.
The continuous losses have resulted in complete erosion of networth
resulting in a negative networth of Rs. 585 lakhs. The directors have taken
note of this and have recommended that the company be referred to BIFR
under the Sick Industrial Companies (Special Provisions ) Act,1985.
The industrial relations have been cordial and the employees have extended
their full support inspite of the most trying circumstances and hardships
faced due to continued cash loss situations.
In view of the loss, the Company is not in a position to declare any
dividend during the year ended 31st March 2000
The depression that dominated the valve market in 1998-99 has started
disappearing. There are significant signals from International market about
the revival of the valve market. There is also a subtle shift which is
significant for India Some of the export customers who were procuring
castings from South East Asian markets have started shifting to India for
their imports. Some of the traditional off-shore customers of your company
have come back again and started placing substantial orders on the Company.
Your Company at present has orders on hand 450 tons from the International
markets. These are confirmed Order and would represent about 3 months
Another significant development is the keen interest being evinced in the
products of your company by a host of new customers. Many of them have
asked for patterns and development of sample castings. Your company's
response have been fast and positive. This has resulted in the company
getting small trial orders. It is hoped that these can be made into
substantive orders through production and supply of quality products,
constant dialogues and discussions and with positive and fast response to
the emerging diversification needs of these customers. The confirmed export
orders as at the end of July 2000 is much more than the total exports made
during the fifteen month period ended 31st March 2000. Your Company has
every reason to believe that this trend will continue.
In the domestic market too the present trend indicates enlargement of the
customer base and the quantum of sales Serious efforts are being made to
boost the sales in the domestic front too. Hopefully, with the availability
of finance the Company would be in a position to enlarge its product range,
in the form of new and special alloys, heavier weight range castings, fully
machined casting and other types of valves not being manufactured hitherto
and supply to the needy market.
Power, a major input to the foundry industry, is continuing to cause
serious concern. The sword of Damocles' in the form of increase in power
cost has to be reckoned in this context.
The main constraint today for your Company is non-availability of need
based working capital. The reasons for this are historic and the members
are well aware of this problem. In the absence of ready availability of
working capital, the company has been working out strategies to meet ever
increasing demand of its products by taking advance from customers. Re-
negotiating credit terms and finding and using other mechanisms of make use
of the available funds Your Company has entered into serious dialogues with
Banks and Financial Institutions to find out a workable and permanent
solutions to meet its ever increasing working capital requirements, so that
the wheels of production car move at a faster phase and the sales can be
considerably stepped up and the overall financial position of the company
is substantially improved.
The Board records its thanks to the Government of India, Government of
Tamil Nadu, Financial Institutions, Bank and others, who have co-operated
with the Company in allowing the wheels of the production to continue
during these difficult days
REFERENCE TO BIFR:
The net worth of your Company, during the 18 month period ended March 31,
1997, was eroded by more than 50% and hence your Company become a
potentially sick company. The company accordingly, filed the requisite
report with BIFR, as approved by the Members of Company, at the EGM held on
October 21, 1997.
Now, the net worth of the Company stands fully eroded during the year under
review due to the huge accumulate losses, and accordingly, the Company has
become a Sick Industrial Company, within the meaning of Section 3(1)(O) of
the Sick Industrial Companies (Special Provisions) Act, 1985. Accordingly,
necessary steps are being taken under Section 15 of the said Act for making
a reference to the BIFR for the revival and rehabilitation of the Company
BOARD OF DIRECTORS:
During the year under review, Mr. S. Seshadri resigned from the Office of
the Chairman & Managing Director, with the effect from December 31, 1999
and subsequently resigned his Directorship with effect from March 31. 2000.
Mr. Rajeshwar Prasad, who was employed as Vice President (Operations) was
appointed as Chief Operating Officer cum-Manager with effect from January
1, 2000, to fill up the casual vacancy caused by Mr. S. Seshadri's
resignation from the Office of the Chairman & Managing Director.
Subsequently, when Mr. S Seshadri resigned his Directorship, the Board of
Directors, at its meeting held on April 2000, based on M/s. DLJMB Mauritius
Investment Company's, proposal for the appointment of Mr. Rajeshwar Prasad
as a whole time Director on the Board, designated as Executive Director &
CEO appointed Mr. Rajeshwar Prasad, a whole time Director with
retrospective effect from April 1, 2000. The Members will be requested to
approve appointment and to fix the remuneration payable to him, at this
Annual General Meeting.
There have been several other Board level changes which are as below:
ICICI Limited withdrew the appointment of Mr. K M Jaya Rao as its nominee
Director on the Board of your Company and in his placed appointed Mr. T.
Raghavendran, Senior Vice President, as its nominee. Mr. T. Raghavendran
was opted as an Additional Director on the Board of your company with
effect from April 18, 2000.
M/s. DLJMB Mauritius Investment Co., withdrew the nomination of Mr. Prateek
Dhawan as its designated Director the Board, and in his place nominated Mr.
Gaurav Malik as its designated Director. Mr. Gaurav Malik was co-opted an
Additional Director on the Board of your Company with effect from July 30,
M/s. DLJMB Mauritius Investment Co., withdrew the nomination of Mr. Mathew
Cyriac as its designated Director the Board, and in his place nominated Mr.
Mayank Dhanuka as its designated Director. Mr. Mayank Dhanuka co-opted as
an Additional Director on the Board of your Company with effect from April
The Board place on record its sincere thanks for the invaluable services
rendered by Mr. S. Seshadri, Mr. Mathew Cyriac, Mr. Prateek Dhawan and Mr.
K M Jaya Rao.
Mr. R. Vedasagar, Mr. N Balasubramanian and Mr. George Varughese are due
for retirement by rotation and being eligible, offer themselves for re-
Mr. T. Raghavendran, nominee Director of ICICI Limited, Mr. Gaurav Malik
and Mr. Dhanuka, designated Director of DLJMB Mauritius Investment Co.,
who were co-opted as Additional Directors will hold office till the date of
ensuing Annual General Meeting, as per the provisions of Section 260 of The
Companies Act, 1956. Members requested to approve their appointment as
Directors at this Annual General Meeting.
REQUIREMENTS UNDER SECTION 217 OF THE COMPANIES ACT, 1956.
A statement showing the particulars of employees who were drawing a salary
more than the limit prescribed under Section 217(2A) of The Companies Act,
1956, read with Companies (Particulars of Employees) Rules, 1975 and the
Companies (Particulars of the Employees) (Amendment) Rule 1999 is given in
the Annexure "A" to this Report.
A statement containing the information required under Section 217(1)(e) of
The Companies Act, 1956, read with Companies (Disclosure of particulars in
the report of the Board of Directors) Rules 1988, is given in Annexure "B"
to this Report.
Amount which had matured and claimed by the depositors during the year
under review were repaid on due date There were no un-matured deposits
outstanding at the close of accounting year. Fixed Deposit of Rs. 0.11
lakhs which matured during the earlier years remains unclaimed as at the
end of the year.
M/s. Bharat S. Raut & Co., Chartered Accountants, hold office till the
conclusion of this Annual General Meeting. The retiring auditors are
eligible for re-appointment The Members are requested to approve their
appointment as statutory auditors of the Company to hold office from the
conclusion of this Annual General Meeting till the conclusion of the next
Annual General Meeting and to authorise the Board to fix their
DIRECTORS' RESPONSE TO AUDITORS' REPORT:
The auditors in their report have mentioned that the ability of the company
to continue as a going concern is depended upon continuing financial
support from the promoters of the company, the formulation and
implementation of a suitable rehabilitation package. Subsequent to the
balance sheet date, the Company continues to undertake normal business
operations. The signs of revival in the market, the confidence reposed on
the company by valued customers and suppliers, will keep the company a
going concern. The company intends to take up with Institutions and banks
under the supervision of the Board for Industrial and Financial
Reconstruction suitable financial restructuring package and the company
will be looking for a suitable co-promoter at the appropriate time.
The auditors have also expressed uncertainty about the company's ability to
defend the case involving sales tax dispute The company is confident of
defending the claim successfully with the sales tax Appellate Tribunal.
The auditors have mentioned that the Company has not been regular during
the period in depositing Provident Fund, Employees' State Insurance dues
with the appropriate authorities. Due to tight liquidity position there has
been some delay in depositing these dues with the appropriate authorities.
But these are being deposited, though late.
The Board records its sincere thanks to the Financial Institutions led by
ICICI Limited, Company's bankers,valued customers and suppliers for their
continued support. The Board also records its appreciation for the
wholehearted co-operation and understanding extended by the employees of
the Company. The Board is also grateful to its share holders for the
tolerance and patience shown by them and their co-operation in several
steps being taken by the company
On behalf of the Board
Rajeshwar Prasad PROF. PREMCHANDER
Executive Director & CEO Director
August 9, 2000
Annexures to Directors' Report to Shareholders
PARTICULARS REGARDING CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION,
FOREIGN EXCHANGE EARNINGS AND OUTGO.
A. Conservation of Energy:
1. Energy conservation measures taken. Motor connections were changed from
delta to star in the case of under
Provision of Auto transformers have
been made in the lighting circuit
to maintain uniform voltage supply.
Improved the natural lighting in
the foundry shop by providing
translucent roofing sheets to
minimise electricity consumption
during day time.
2. Additional invenstments and Provision of soft start cum energy
proposals, if any, being implemented saver devices in additional areas
for reduction of consumption like Resin Mixers, Compressor
of energy motors, etc.
Improving power factor from 0.90 to
3. Impact of the measures at (1) The above would result in reduced
and (2) above for reduction energy consumption and consequently
of energy consumption and reduced costs. The impact is
consequent impact on the exactly quantifiable in money terms
cost of production of goods. only on implementation of measures
in (2) above.
B. Technology Absorption.:
Form for disclosure of particulars with respect to Absorption
(See Rule 2)
1. Specific areas in which R&D Continuous research on strength and
carried out by the Company properties of moulds using enhanced
properties of reclaimed sand and
reducing resin content in the back up
Development of improved metal melting
techniques using higher composition of
Devising new product development and
pouring techniques for manufacture
of castings in the weight range of
1.75 tons per piece.
Development of special production and
processing techniques of NACE
specifications castings and medium
alloys of martensitic micro
structures. carried out by the
Benefits derived as a result of The above have resulted in reduced
the above. cost of production and enhanced
3. Future plan of action Research and Development efforts are
being continued to ensure better
work and for providing quality
products to customers.
4. Expenditure on R&D:
(a) Capital NIL
(b) Revenue NIL
(c) Total NIL
(d) Total R&D expenditure as
a percentage of total
Technology Absorption, Adaption and Innovation.
1. Efforts in brief made in Technology updation on macro alloying and
technology adoption, redesigned gating systems is in progress to
adaption and innovation understand the metal flow and behavious in
Training of personnel in the new product
development areas to reduce lead-time on
development and cost.
2. Benefits derived as a High degree of new product acceptance
result of the above resulting in reduced development cost, time
efforts. and improved process cycle.
3. Imported Technology NIL
C. Foreign exchange earnings and outgo.
1. Activities relating to exports; FOB value of exports made during the
Initiatives taken to increase period under review is Rs.385.47
exports; lakhs. The Company is continuing
Development of new export to develop proto-types for new
customers to increase the customer
base and plans to achieve a higher
export content in the total turnover.
The Company is constantly exploring
new export markets and is geared up
fully on new product development
activities to cater to to an
expanded product range.
2. Total Foreign Exchange used Used: Rs.106.84 lakhs
and earned. Earned: Rs.385.37 lakhs